Bank of England announces Sterling stablecoin regime: up to 60% backing in UK short-term government bonds, at least 40% in non-remunerated Bank of England deposits, per-coin limit for retail, joint supervision with the FCA, consultation ends on February 10, 2026. At the same time, the consultation is open until February 10, 2026, so many provisions may be amended and updated.
See a detailed breakdown of stablecoin issuer profits: How does Tether make money?
Main monitoring architecture
First, FSMA 2023 expands the Bank’s mandate to include digital payment assets, including systemic stablecoins. HM Treasury decides which payment systems or providers are designated as systemically important, and the Bank of England and the FCA then jointly supervise such systems under the Banking Act 2009. A table provides an overview of this regime, distinguishing between retail and corporate payments use cases and large-scale use. In non-core wholesale scenarios, the FCA-only regime applies, while in core wholesale cases banks point to the digital securities sandbox route.
Reserve model: 40-60, and access to bank accounts. The bank will move away from its original idea of having a 100% unpaid reserve in its Bank of England account. The report proposes a mixed model, with at least 40% backed by unremunerated deposits with the Bank of England and up to 60% backed by short-term British government debt denominated in sterling. For systemically important issuers at start-up, we can step up to up to 95% in UK government bonds in the early stages and then reduce to 60% as we grow in size. This position is motivated by balancing the commercial viability of the issuer with monetary stability. The Bank also considers central bank liquidity mechanisms as a backstop to monetize assets.
Retention limits and user scenarios. For broad retail use, the Bank is introducing a holding limit of £20,000 per coin for individuals. The £10 million business limit may not apply to retailers and intermediaries who require larger balances to service their customers. Limits apply per coin, not per portfolio. For example, users can hold a total of £80,000 in four different stablecoins. This approach supports real-world payments use cases without undue concentration of risk in a single asset.
Legal framework and protection of holders. The Bank proposes to hold UK underlying assets on a statutory trust with separation of assets and reserves, mandatory adjustments and redress of discrepancies for the benefit of holders. Issuers must appoint a qualified third party for protection (other than for funds held in bank accounts). This structure increases the likelihood of complete and timely settlement with holders and simplifies asset tracking in the event of bankruptcy or liquidation.
Interoperability and multi-money models. The Bank emphasizes the role of stable and interoperable payment networks and intends to foster interoperability between system stablecoins, traditional and tokenized bank deposits, and central bank money. Regulators view stablecoins as part of a “multi-money” ecosystem, where central bank money remains central to the system.
Is this good for the crypto market and investors?
It is worth noting that the proposed regime clearly allocates the roles of HMT, banks and the FCA and brings the Sterling stablecoin into the supervisory boundary, providing a degree of certainty that is potentially beneficial to the market.
It could also improve the security of the system by creating a sustainable issuer business model through some underlying yield, while setting payment utilities through per-coin limits and limiting market risk through short-term UK government bonds. However, it remains to be assessed how flexible and open this regime is for investors, compared to other regulations in the United States, for example.
In any case, it remains to be seen how the final regulations will affect the investment environment. Stay tuned for the latest updates and opportunities in the new economy, crypto industry, and blockchain development.